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During the seven years I have been
chairman of the EIS Association it has
been rewarding to see the EIS industry
mature and play a growing role in the
much needed provision of equity capital
for new and small businesses. There are
now a significant number of managers
(30+) of EIS funds providing a professional
approach to the selection and management
of EIS qualifying investments as well as
looking after the interests of early stage
investors as portfolio companies grow.
It was particularly fortunate that David
Gauke, Financial Secretary to the Treasury,
was persuaded to do battle with the EU
and managed to successfully widen the
parameters for EIS relief. This supported
businesses that had been operating
for two or three years who continued
to need equity finance to support their
growth. Thanks to this intervention:
The maximum gross assets a
qualifying firm can have has risen
from £7m to £15m (pre new money)
The maximum number of
employees has risen from 50 to 250
The annual cap for investment into an
EIS company has risen from £2m to £5m
In addition, the EISA Association (EISA) was
also able to persuade the Government not
to proceed with the proposed £50,000 cap
on loss relief applying to EIS, and to increase
the Income Tax relief from 20% to 30%.
Thanks to the EIS scheme, businesses
requiring early stage and development
capital now have a better chance of
succeeding and contributing to the growth
of the economy. HMRC is also a beneficiary
as the Corporation and Income Tax
generated as such businesses expand, as
well as the VAT on the spending of their
employees, leads to increasing tax revenues.
Since these overhauls in April 2012, the
interest in EIS by both businesses and
investors has increased dramatically.
Here are some key statistics:
EIS backed funding raised £1.02bn in the
tax year to March 2012, almost double the
£545m raised in the previous year. This level
of growth is predicted to have continued
throughout the 2013 and 2014 tax years
The number of businesses using EIS has
also increased by some 50% since 2011
Over 20,000 businesses have raised
£11bn since EIS was introduced
And perhaps the ultimate compliment
for EIS was a visit by French officials to
the UK some 18 months ago, in order
to find out why the UK EIS was so much
more successful than the then existing
French Scheme for incentivising equity
investment in small companies.
Finally, one of the most under appreciated
attractions of EIS is that (subject to a two
year holding rule) EIS investments are
potentially free of Inheritance Tax. This
is becoming of increasing importance as
the ‘baby boom’ generation grows older
and is looking for ways of protecting
its family from Inheritance Tax bills.
As a result of the attractive conditions for
EIS investing, both Wealth Managers and
Financial Advisers are increasing their focus
on EIS investing. To assist this, the EISA, in
partnership with Tolleys, has launched a
Diploma Course on EIS investing – consisting
of an online course of some 12 hours
followed by an examination. The course will
cover an introduction to the EIS territory; the
tax rules and incentives; the EIS Fund sector
and relevant financial regulation. We would
strongly encourage any advisers who are
considering EIS investments for their clients
to take this diploma to ensure they have
the best quality training available on EIS.
We also welcome the introduction of
Intelligent Partnership’s annual EIS
industry report as another development
that will grow awareness and knowledge
of our sector and make EIS investing
easier for advisers and their clients.
EIS investing is playing an important role
in supporting the significant increase in
entrepreneurial activity in the UK over
the last three years, particularly in new
business areas and new technology.
Several of these companies will be the
giants of tomorrow, driving the growth and
success of the British economy. Investment
in this sector is to be encouraged and
applauded and we hope the positive
story of the last seven years continues.
Lord Howard Flight,
Chairman of the EISA
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